Yahoo! profits down as advertising system yet to kick in

by Alex Donohue, Brand Republic 18-Apr-07, 09:20

LONDON - Yahoo!'s first-quarter profits have dropped by 11% to $142m (£71m) as its new Panama advertising platform, designed to take on Google, has yet to kick in, pushing its shares down by more than 8% before recovering.

Net income for the period stood at $142m for the three months ending March 31, but revenues rose by 7% to $1.67m, compared with $1.57m for the same period last year. Operating income was down 16% to $210m.

Shares in Yahoo! fell more than 8% to $29.51 before recovering to $32.09.

Industry analysts have speculated that Wall Street overestimated the performance of Panama since it was introduced in the third quarter of 2006. The upgraded system places ads based on price and relevancy to their target audience, allowing media buyers to build campaigns that link ads to multiple keywords.

Yahoo! had previously stated it did not expect a return on Panama until the second quarter of 2007.

The company said it remained optimistic of achieving double-digit growth for the remainder of 2007, as it continues to roll out Panama, its enhanced ad platform, with the aim of taking on Google and Microsoft.

Terry Semel, chairman and chief executive officer for Yahoo!, said: "We continued to make good progress against the goals we outlined for the company last year and, as a result, delivered a solid financial performance for the first quarter.

"We know there is still much more to do and room for more continued growth across our business."

Yahoo! recently extended ad partnerships with the print media industry and finalised deals with eBay's PayPal, which it expects will increase revenue performance as the year progresses.

However, shareholders might be disappointed it has not gained ground on Google over the last nine months.

According to industry research, Yahoo! currently has a 28% of the US search engine market, with Google way ahead on 48%.